State House passes bill allowing companies to keep wage taxes

By Jim T. Ryan,
October 16, 2012 at 11:00 AM
- Last modified: October 16, 2012 at 11:05 AM

The state House of Representatives voted Monday to pass House Bill 2626, which would allow companies in Pennsylvania to collect personal income taxes from new-employee paychecks and keep 95 percent of it.

The bill, sponsored by Rep. Kerry Benninghoff, a Republican representing Centre and Mifflin counties, has been put forward as a job creation bill. Benninghoff said last week the bill will allow workers to reinvest in their companies and create more jobs in the state.

However, the bill has faced stern criticism because when it was proposed it was supposed to apply only to new companies coming into the state. Opponents also point out that the bill does not require the creation of new jobs, only that companies add new hires, meaning they could keep the money for filling an existing position.

Additionally, the process would be controlled by the companies and the state Department of Community and Economic Development, with no provision for employees to have a say or opt out. The bill would require companies to notify employees when hired that they participate in the program.

Critics point out that it is illegal for an employer to collect taxes from employee wages and not remit the full amount to the state. The state also said no current laws would allow that.

“It is an ill-conceived program, enacted in haste, that will make it harder for Pennsylvania to maintain a balanced budget,” said Sharon Ward, director of the Harrisburg-based Pennsylvania Budget and Policy Center.

“Credible studies have shown that most new jobs are created by existing companies, rather than interstate transplants,” Ward said in a statement. “The program authorized by HB 2626 is notorious for misuse by states that lure companies a few miles across a state border without creating new jobs. Pennsylvania can ill afford another opportunity to let companies game the tax system. The Senate should reject this bill.”

The bill is moving fast through the Senate as it did in the House, where it took just over a month for amendments and approval. Yesterday, the Senate Finance Committee voted 8-2 in favor of the bill, and it was sent to the appropriations committee.